I'm wondering it Apple frown on this kind of thing? Quite soon after I added the banner, my App was removed from their featured areas (while it was dramatically increasing in profits). I'm wondering it the two (adding a sale banner, and, being removed from their featured sections) are related?!

On for I think 2 weeks in total. One week in New and Noteworthy. One week in What's Hot. I'm guessing they refresh their lists every Thursday ... also ... their decision to drop an App from their lists is probably based on how much money it's making them. So might be completely unrelated to it having a sale banner on the icon.

Nice to know how it works though, and if you're doing something Apple don't like, and would cause them to remove your featured status etc.

I'd call that frowning - though I'd bet there are over 50K apps with "Free" or "Lite" in the icon already.

I'm thinking this is part of trying to get developers to move to the in-app purchase method rather than two different apps to have a 'demo' version. They probably won't do anything about apps that already exist but may start rejecting new ones with "Free" or "Lite" in the icons.